Revenue Flashcards
What is revenue
Receipts of money from the sale of goods and services over a period of time such as a week or year
Formula of revenue
Sales price x quantity
What is total revenue
Total amount of money received from the sale of any given level of output
Formula of total revenue
Quantity x average price
When price is constant what is TR
Rising diagonal line
Why does TR rise then fall (2+)
When consumers price elastic = fall in price leads to a more than proportion change in demand = TR increasing
When consumers are inelastic = fall in price leads to a less than proportion change in demand = TR decreasing.
What is average revue + how is it sold (2)
This is the average receipt per unit sold
TR / Q
What is marginal revenue + how is it calculated
Receipts from selling an extra unit of output
MR = change in TR / change in Q
When PED is elastic what (3)
A fall in price causes a bigger rise in demand
TR increases
AR reduces + MR reduces = price is dropping!
